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Zhou Zheng, chairman of Joy City, says the company will operate 100 malls in 10 years’ time. Photo: SCMP

Cofco’s Joy City steps up mall expansion plan in China with Singapore’s GIC and China Life

The company plans to operate 100 malls within 10 years from about 10 now

Joy City, the Hong Kong-listed commercial property arm of state-owned conglomerate Cofco, plans to leverage its funds to reach its new goal of operating 100 malls within 10 years, a highly ambitious target considering that it planned to own only 20 malls by 2020.

Zhou Zheng, chairman of Joy City Property, told the South China Morning Post on the sidelines of the company’s tenth anniversary celebrations that it would use its 11.4 billion yuan (US$1.73 billion) fund set up in August with Singaporean sovereign fund GIC, and insurance giant China Life, to expand its presence in tier and tier two cities, with the aim of expanding its portfolio to 50 projects in five years, and 100 in 10 years.

The ambitious vision marked a departure from its previous cautious approach when it stated that its goal was to operate 20 malls by 2020. The developer has opened only nine malls in the past 10 years in China with another 10 in the pipeline.

“In the past we concentrated on building our brand and operation expertise,” said Zhou. “Now we feel that we have come to a stage where we can leverage our know-how to expand faster.”

Xu Hanping, chief financial officer of Joy City, said that even with a 60 per cent leverage, the fund pool can be expanded to more than 20 billion yuan and be used to buy out distressed malls.

“It’s much quicker than acquiring land and building a new mall from scratch.

“GIC has cooperated with us before on individual projects and is very content with us, and we decided to upgrade the cooperation to fund level,” she said.

Joy City is known for operating malls that embrace youth subcultures with its target audience in the 18 to 35 age group.

To expand its appeal, the developer on Wednesday also launched a new mall brand Joy Breeze, targeted at target middle class families aged 25 to 45. The malls will be smaller in size, ranging between 50,000 square metres to 120,000 square metres, compared with 100,000-300,000 square metres of its youth brand Joy City.

“The new brand will help the company to achieve its “100 projects in 10 years” target, Zhou said.

Dickson Sezto, chairman of Shanghai-based Insite Asset Management, which has intensive cooperation with Joy City, said that in the past decade Chinese developers were busy building shopping malls as they replicated the format across China.

“But the next 10 years standardisation will give way to differentiation,” Sezto said. “Developers may have to pay the price for the outdated standardisation model.”

In September 2016 Joy City sold a 49 per cent stake in six properties to a “core fund” funded by GIC and China Life for 9.3 billion yuan.

Xu said the core fund will keep focusing on mature projects with stable rent income, while the buyout fund will focus on acquiring existing malls.

Joy City Chaoyang shopping centre in Beijing. Photo: SCMP
This article appeared in the South China Morning Post print edition as: cofco’s joy city steps up china expansion
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